Eurex to offer FX futures

Eurex move on forex signals clash with CME
By Jeremy Grant in Chicago
Last Update:4:05 PM ET June 9, 2005

Eurex plans to offer foreign exchange futures contracts this year, as the Frankfurt-based derivatives exchange tries to boost its fledgling US operation and expand global distribution of its products.

The move sets the stage for a battle between Eurex and the Chicago Mercantile Exchange in one of the world's fastest-growing derivatives contracts. The CME is the only exchange to offer trading in forex futures, aside from a small dollar index product at the New York Board of Trade.

The plan is likely to signal the continued commitment to the US of Eurex's owners, Deutsche BÃ¶rse and the SWX Swiss stock exchange, in spite of management turmoil sparked by the recent departure of chief executive Werner Seifert as Deutsche BÃ¶rse chief executive. The new contracts would be listed on Chicago-based Eurex US but would be rolled out globally, market participants said. Eurex said: "We are always looking to expand our product offering."

The exchange would offer futures on the euro, dollar, Swiss franc, yen and cross-currencies. "The ultimate purpose is to have a second choice," said a forex specialist at a European bank. Eurex launched its US futures exchange two years ago, offering US Treasury bond futures in competition with the Chicago Board of Trade but has so far failed to take market share.

Eurex believes it stands a better chance against the CME because it will offer contracts worth $250,000 each, about double the size of contracts at the CME. This is likely to be attractive to investors such as hedge funds because it will require fewer contracts to be purchased to carry out big trades. Eurex is expected to announce its plan next week, with a launch in September. The CME last week said it would introduce a one-year incentive programme to attract big hedge funds and commodity trading advisers to its forex futures markets. Participants with more than $2bn in assets under management would qualify to trade CME forex products on the exchange's Globex electronic trading platform.

Jun 16 2005
The worldâs largest derivatives exchange Eurex announced on Thursday that it will introduce foreign exchange (FX) futures on September 23, 2005. This move marks the extension of the Eurex global liquidity network into a new asset class. Contracts will initially be listed on six major USD currency pairs (Euro, Australian Dollar, British Pound, Yen, Swiss Franc, Canadian Dollar) and four cross currency pairs (EuroYen, SterlingYen, EuroSwiss, EuroSterling). The contracts will be traded on Eurex US, leveraging the 23 hour trading platform and U.S. regulatory environment for FX trading. Contracts will be cleared by The Clearing Corporation (CCorp), using the Concero clearing services platform.

"FX is one of the fastest growing markets in the world, and it is the only major financial asset class where Eurex has not historically been represented," said Rudolf Ferscha, CEO of Eurex. "By entering the FX market Eurex will further expand its portfolio of financial derivative products. Structural changes in the global FX markets have further driven use of FX products and increased demand for the transparency and reduced counterparty risk offered by on exchange markets. Listing FX contracts on Eurex US will offer the global marketplace the opportunity to trade FX on a liquid and transparent market with a highly effective distribution network."

"As part of the Eurex Global Liquidity Network, the Eurex US exchange and technology platform are uniquely positioned to meet the worldwide demand for FX futures contracts," said Satish Nandapurkar, CEO of Eurex US. "By making use of Eurex USâ existing 23 hour trading platform, we are able to satisfy customersâ immediate demand for additional liquidity and significantly lower their cost of execution."

Eurex US will waive all trading fees for FX contracts for all market participants for the duration of 2005. FX contracts on Eurex US will be supported by a selected network of banks and market making firms, ensuring liquidity from launch.

Eurex is the worldâs largest derivatives exchange and a market leader in interest rate, equity and index derivatives. On Wednesday June 15, Eurex traded record volume of 8.86 million contracts, more than any derivatives exchange has ever traded before on a single day.

eurex has always been a very reliable system and there's no question they'll come in aggressive on fees. definitely good timing. i know a lot of guys that are looking to switch from minis or bonds to fx. if cme doesn't lower fees, they could see traders choosing eurex.

CHICAGO, Sept 23 (Reuters) - Eurex US launched foreign currency futures on Friday and hopes to pull off what it failed to do in U.S. Treasury futures -- gain a decent market share. The products compete against the Chicago Mercantile Exchange currency complex, but Eurex says its primary target is the huge over the counter market, where traded volumes approach $2 trillion a day. FX trading is "still truly an over the counter, spot-driven market. Futures have not made a lot of inroads," Eurex US chief executive Satish Nandapurkar told Reuters.

Frankfurt-based Eurex AG, owned by Deutsche Boerse and the Swiss Stock Exchange, has listed the currency contracts on its U.S. subsidiary because the Eurex US platform can operate 23 hours a day. First-day volume was modest. The most active contract was the US dollar/Euro currency pair, with 249 contracts trading. Some 49 US dollar/Sterling contracts traded. Twenty market makers have signed on to provide bids and offers and eight firms have agreed to act as early volume adopted to provide a consistent amount of volume each day, Eurex said.

Contracts are listed in six major USD currency pairs (Euro, Australian Dollar, Sterling, Yen, Swiss Franc, Canadian Dollar) and four cross currency pairs: Euro/Yen, Sterling/Yen, Euro/Swiss, Euro/Sterling. After a spectacular failure to challenge the Chicago Board of Trade's near-monopoly in U.S. Treasury futures, Eurex sees the FX field as more open for new participants.

The CME, the largest U.S. futures exchange, dominates currency futures trading but its turnover still accounts for only about five percent of global FX volume. CME has made expansion of FX trading a key part of its expansion plans, especially as it looks to expand the amount of its overall volume traded from Europe. However, Nandapurkar said Eurex's strength in the European market could boost its chances in currencies.

"While trading is geographically spread out, it is especially big in Europe. The market share that futures have gained has been mostly in the United States. But if FX has any home it is probably more in Europe."

More asset managers and hedge funds are looking for "tactical exposure to currencies as an asset class rather than as a pure hedge, Nandapurkar said. One the province of huge banks, currency trading has become more commoditized in recent years. Hedge funds have started to aggregate liquidity and have access to the interbank market across various trading platforms, Nandapurkar said.

"The liquidity pool is spilling outside the banks now, pulling in new users. FX trading is more a web of liquidity with a lot of nodes," he said.

The Eurex contracts are two to four times the size of CME's currency futures and quote the products using the same format as the spot market, in contrast to the CME's listings. Eurex has waived fees for the rest of 2005 and says its 2006 fees will be competitive with the OTC market.

well, if the contracts are 2-4 times the size of the mercs, this will again vastly reduce the costs involved.

i still dont get why eurex chase established markets though - why not go for markets where they can add real value (like attacking nybot/comex where the fills are crap, the data is crap, and the platform is crap - ie still in the pits)

as for 4x, i think they would be better focusing on non usd crosses. the euro/yen and euro/sterling for example